Avoiding Atlantis: Building a Franchise Restaurant That Stays Afloat

CHARLOTTE, N.C., Dec. 5, 2013 /PRNewswire/ -- The choice between starting up an independent restaurant or a franchise restaurant can be a difficult one for aspiring entrepreneurs, as each road has its benefits and hurdles. The first thing to consider, however, is the high failure rate. A study published by Cornell University called "Why Restaurants Fail," determined that about 57 percent of first time franchise chains fail and about 61 percent of independent operators are equally unsuccessful. While opening a franchise offers an arguably safer bet, and additional benefits like brand establishment and corporate support, investing in any start-up business—let alone a restaurant—given today's ever-uncertain economic forecast requires complete dedication, and should translate to countless hours of careful research by any would-be restaurateur.

Before buying a franchise and after the needed capital is sourced, the most important decisions to be made are: brand selection—where product quality and consumer recognition reign supreme—and maybe more importantly, the location. Everyone knows the cliché's, but by no means are they overstated; location selection is often the overwhelming cause of both failure and success. Before making these decisions, it's also recommended that any new owner consults with experienced individuals who have had success. Successful owner-operators will have already recognized and capitalized on what it takes to find and create franchise demand in a new location.

One such example of an experienced operator would be Mike Pruitt, who through his Charlotte, NC-based Company, Chanticleer Holdings, has taken the Hooters brand internationally, and has built new locations in countries like Hungary, South Africa, and Australia. Via Chanticleer, Pruitt has also acquired stores of the high-quality burger chain American Roadside, which is also based in Charlotte, and recently acquired stores from the Just Fresh chain of cafes, which provide freshly prepared salads and other nutritious options for today's time-pressed consumers.

"Once you've lined up the capital and have a skilled operator to run the restaurant, the location, and how the people in that location like your brand and food will determine whether you sink or swim," said Mr. Pruitt. This CEO should know: in just a few short years he's added to what was just a minority position in Hooters' domestic stores and took the all-American brand to seven global locations on 3 continents. Pruitt also plans to take Just Fresh overseas, and hasn't ruled out expansion for American Roadside.

"A good location gets a large amount of traffic—whether it be foot or vehicle—and that traffic should be made up of people you know will love your food and experience," added Mr. Pruitt, "and it doesn't hurt to have a name and a logo that locals and passerby's will immediately recognize and associate with fun memories."

For aspiring franchise owners, take a note from history as well as from seasoned vets: don't build on uncertain ground, or in other words, location, location, location.